ViacomCBS and Discovery stocks continued their dramatic falls on Friday, each closing more than 27%.
This has resulted in ViacomCBS losing more than 50% on the week while Discovery is down about 45%.
ViacomCBS shares started falling earlier this week after the company announced it would raise $ 3 billion from new stock offerings. It was also downgraded to underweight of equal weight by Wells Fargo, which also downgraded Discovery from overweight to equal weight.
ViacomCBS and Discovery were severely shortened companies as investors remain skeptical of the long-term prospects for companies in the crowded media landscape. The contagion effect of the recent brief bottlenecks at GameStop and AMC Entertainment (not AMC Networks) led cautious investors to cover bets on ViacomCBS, Discovery and AMC Networks, CNBC previously reported.
“What has changed is [ViacomCBS] went from a net short position where there was a squeeze and not a lot of stocks were available, and then the company issued a lot of new stocks, “Charles Bobrinskoy of Ariel Investments said on Wednesday not the same type of short squeeze.”
Investors also attributed the withdrawal to a signal from ViacomCBS management indicating that equity was overpriced.
“We never thought Viacom would trade near $ 100 per share,” said Michael Nathanson, an analyst at MoffettNathanson. “Obviously, ViacomCBS management has also not sold $ 3 billion worth of stocks / converters at elevated levels to clean up the leverage balance and invest more in streaming.”
– CNBC’s Alex Sherman contributed to this report.